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Hello, it’s Katie Martin here again, stepping in for Harriet Agnew while she takes a spot of “me time”. Fear not, normal service will return next week. Here’s the lowdown on the latest in asset management while she’s away, including a really delicious bumper helping of “further reading”.
One thing to start: Big numbers at BlackRock. Results on Friday showed assets have shot up to a stonking $10.5tn, thanks in no small part to bitcoin ETFs and buoyant stocks, while net income was up by over a third from the same period last year. Larry Fink’s firm beat expectations from analysts but one small wrinkle came from $19bn in outflows from cash management products. Hard to argue overall, though. All you need to know, right here , by Brooke Masters in NY.
It is starting to feel like at least parts of Mifid II were a really weird dream.
Last week, the UK’s Financial Conduct Authority proposed that fund managers should be able to bundle fees for research from investment banks in with their broader trading costs, a move that unpicks one of the central objectives of Mifid II — the widely reviled package of post-’08 reforms that was urged on the EU by . . . the UK. My excellent colleagues Nikou Asgari and Emma Dunkley have the story .
The forced separation of research and trading, which required investors to pay separately for analysts’ musings, was clearly well-intentioned and sought to avoid conflicts of interest. Fine. But the knock-on effects were often less than ideal, including a huge shrinkage of coverage for small and medium-sized companies.
Now the UK is seeking to exercise its post-Brexit wriggle room by jettisoning the unbundling requirement which, to reiterate, was originally the UK’s idea.
“It is ironic that this is probably going to be positioned as a post-Brexit freedom but we were the ones that pushed this on to the Europeans, we drove this,” said Mike Carrodus, founder of Substantive Research (and, weirdly, a colleague of mine way back in the dark ages. Hi, Mike.)
The obvious question is whether unpicking the unbundling will come soon enough to rekindle some interest in smaller listed stocks, and the answer is . . . well, we’ll see. It feels like the damage has been done, but at the same time, a long series of relatively small tweaks like this is needed to try to wake up London’s stocks.
The FCA said the move would give fund managers “greater freedom in how they pay for research, supporting their investment decisions”.
I twisted the arm of my excellent colleague Costas Mourselas into boiling down the intriguing story he did last week with Robert Wright , about two things that never seem to mix without a fight: hedge funds and shipping. In his words, the abridged skinny is this:
In late 2023, two of Europe’s shipping powerhouses — Frontline (controlled by Norway-born John Fredriksen) and the Saverys family of Belgium — struck a deal aimed at resolving a spat that has been running for years over the control of Euronav. As part of the deal, publicly listed Euronav would drop a case against Frontline for exiting a merger agreement at the start of that year.
Finally, it was all wrapped up.
But wait! Enter stage right New York-based hedge fund FourWorld, whose chief investment officer John Addis told the FT that the deal was “one of the most egregious cases we have ever seen” of a majority shareholder taking advantage of minority interests. The hedge fund last week took to the Belgian courts to try to unwind the deal, arguing that the agreement between the two parties to drop the merger gave up the opportunity for seeking “large-scale damages” that would benefit minority shareholders. Maybe, maybe not, said Alexander Saverys, who told the FT that winning the arbitration case was not a given, and that it would have taken “years, incurring a lot of costs . . . for a very uncertain income”. He added: “We are adamant that we are in the right and that we have done nothing wrong. We will vigorously defend ourselves against these claims that have no merit.” Lars Barstad, Frontline chief executive, said: “[We] insist that all [Frontline’s] dealings in relation to Euronav have been in accordance with applicable law and regulation.”
This one will run and run.
This year is not working out so well for dollar bears. Again.
Here’s how other major currencies have performed against the dollar this year. (Ouch . . . especially for the yen .)
Last week, the dollar notched up its strongest run since 2022, in one of the more conspicious market responses to the bumper US inflation report. That sound you can hear is sellside analysts hurriedly ripping up their Federal Reserve rate-cut forecasts. (Suddenly the market is looking for maybe one cut this year. That six-or-seven consensus from the start of 2024 feels like ancient history.)
Meanwhile, several other central banks, notably the European Central Bank, still have their eyes set on a cut. “The buzzword that is going through markets at the moment is divergence,” said Quentin Fitzsimmons, a senior portfolio manager at T Rowe Price. Read more , from the ever-industrious Mary McDougall .
Buckle up, it’s been a busy one.
“When you wake up from waterboarding and you’re not dead, you are supposed to feel happy. That is not a good pattern of regulation.” Yikes. The NY dream team of Harriet Clarfelt and Brooke Masters report on the extraordinary shutdown of $220bn (!) in US institutional prime money market funds — roughly a third of the entire market — the result of a tweak in SEC rules.
“There is only one way for a water utility serving the capital of a G7 country to lose so much value so fast: it was never worth £5bn to begin with. Yet its owners denied this reality for years.” A mic-drop line there from the acerbic Frederic Blanc-Brude at Scientific Infra & Private Assets on what institutional investors must learn from the Thames Water nightmare.
How scary is private credit ? Judge for yourself with this Unhedged podcast and the IMF blog and source documents .
The hidden power of index providers : a thoughtful piece as ever from FT contributing editor, ‘6 Music Dad’ and brainbox Toby Nangle .
Izzy Englander goes poaching: Goldman Sachs’ global treasurer is leaving after a 24-year career at the bank to join Millennium Management . Harriet A, Josh Franklin and Ortenca Aliaj have the scoop.
BRK 0-1 HMRC: BlackRock has lost an appeal relating to UK tax it sought to reclaim from HM Revenue & Customs on its $13.5bn acquisition of Barclays Global Investors back in 2009. Harriet Agnew has the lowdown , again. No wonder she needed a break.
If you’re in asset management and you’re not ready for the US’s imminent shortening of trade settlement cycles, then I don’t know what to tell you beyond that you should read this contributed piece from Gerard Walsh at Northern Trust and this risk alert from the SEC explaining what its Orwellian-sounding Division of Examinations is thinking about the whole thing. (Shameless self-promo alert: I wrote about it recently too.)
Sns of hmr flr . . . Stp bng mn to abrdn — Shot from the driest wit at the FT, Alphaville’s Bryce Elder . Chaser from City AM.
Yes, that is more than five. I regret nothing.
OK, OK fine, I will deny it if you ask, but in truth, I can be a tiresome east London hipster at times. Evidence includes climbing , baking my own bagels , living in Walthamstow since before it was cool, etc. Therefore I have no hesitation in recommending a too-cool-for-school “vegetables-focused” eatery I visited recently called Slowburn . It’s located near Blackhorse Road tube station in a warehouse that is also home to a working artisanal jeans manufacturer , because that’s how we roll round my way. Delicious refined-but-casual grub, outstandingly scrummy chicken and fish despite the veg focus, loads of cool sewing machines, bolts of fabric and industrial washers.
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